TRADE

WITH the breeding sales almost upon us, I face commenting on future trade with some trepidation. We are still suffering from the hiatus set in train by the 1996 BSE fiasco, but the future is looking clearer.

There are probably more positives now than a year ago. Currency differentials which impinge on trade are moving in the right direction, with sterling slightly weaker and the k appearing to be gaining some strength. If this continues it will have a positive influence on the market by autumn when most lambs will be coming off.

Currency value has a vitally important part to play in our pricing structure. New Zealand has played a significant part in the success or failure of UK sheep farming for over a century. With a low valued NZ$ and a high valued sterling, the Kiwis can put product on to the UK and European market at prices that are beneficial to them, but damaging for us.

In the past few months, when our prices dropped lower than expected, a significant quantity of NZ lamb destined for France actually appeared here. An apparently high additional quantity of lamb on a more or less constant market dep-ressed prices – the supply-demand equation will never really be bucked. Equally, the respective values of sterling and the k have a dramatic influence on our ability to export.

Bearing in mind the NZ influence, much greater effort needs to be re-established to work with them to ensure supplies do not hit our markets at our peak production times; it is disastrous for all sheep producers wherever they are.

So where are we now? Kiwi lamb has been consumed, UK lamb is coming on stream in increasing quantities – there are even some signs that prices are hardening, possibly the result of a difficult season with too much wet and not enough sun. Even so, there are some really first rate lambs about – the carcasses hung at the Royal were the best for years.

I get the impression that in some high hill areas tupping time took place in weather conditions that were far from ideal – subsequent lambings reflected this and the cold, wet lambing season brought its own problems. The result is that some people have lower numbers to come off which could have a positive bearing on price.

The reduction which has taken place in lowland lamb production will also help. One ram breeder was concerned that about 18,000 ewes had been put off in a relatively confined area which he supplies. But not all of these will have gone to the kill and many we know will have gone to enable new flocks to be started at a fairly low investment.

Industry trends will reflect slightly lower numbers of lambs and provided this does not go so far that we start to lose critical mass then the industry is likely to benefit in the next few months.

The other potential area for improvement will come from the targeted approach of Farmers First to seek out new markets for carcass lamb as well as maintaining the live export via Farmers Ferry. But it is essential that Farmers First doesnt just compete for the existing customers of other UK-based meat firms which have provided the traditional link with our Euro partners.

Into the entire pattern we have to consider that a not insubstantial number of the hill and upland flock has been taken off to allow perceived benefits to be gained from conservation payments. We are also looking at renewed efforts to improve quality of hill and upland flocks at the expense of quantity.

The message, therefore, becomes relatively clearer. The national flock will stabilise at perhaps 1 or 2% points down. There will be greater concentration on the provision of a quality article. People selling the quality of breeding ewes and rams are likely to find ready custom.

All of this will depend on the fact that supermarket buyers, as major influencers of the market, will need to pay prices which allow farmers to at least cover their production costs. These vary but there is a reasonable consensus that a viable sheep business needs a rock bottom price of at least £1/live kg to get near break-even. Screwing prices under this level is bad business, will result in a wrong attitude from producers, a poorer quality article for the future and no confidence to invest. &#42

Sheep numbers will fall, helping prices, but we need to concentrate on exports, says John Thorley.

TRADE

THE sheep quota trading period has been open now for the past five weeks. Apart from the initial flurry of activity, trade is relatively quiet. But what is the market likely to do?

There are many factors affecting peoples decisions regarding their quota requirement and much depends on their past and future sheep policy. This will have to take into account:

&#8226 Tighter cashflow.

&#8226 Extra potential profit from

more sheep.

&#8226 Previous years history.

&#8226 Current and future market

forces.

&#8226 The gap between lease/sale

prices and what farmers will

pay.

For flockmasters, a suppressed market for lambs – the big income earner for many – and a near collapse in cast/cull ewe values and subsequent demise in replacement gimmer/ewe prices, makes cash-flow a major constraint.

Cannot afford to leave

As such, the sheep trade is in such a state many producers cannot afford to leave the industry because of poor stock values. This is especially so in a tenanted situation where those producers look upon their stock as a retirement package. That will keep some pressure on a limited amount of quota.

Many producers will be looking to maximise subsidy claims. But before increasing ewe numbers, producers must question what extra profit can be derived.

On the one hand, keeping your own cast sheep or going into the marketplace to buy cheap ewes incurs extra costs to your business.

And while claiming sheep annual premium for these extra sheep brings in a tidy subsidy cheque, they are tied by retention until May 15.

Last year, many kept cast ewes on their ewe lambs and claimed the SAP. Looking back many now undoubtedly wish theyd suffered the first loss of selling cast ewes into a depressed market.

Instead, they incurred high forage costs over the winter, higher labour bills and still received a poor price for stock. With the apparent loss of a cull scheme (for Scotland), will this situation be repeated?

British consumers are progressively moving away from eating mutton and lamb. Home consumption has fallen by 50% over 20 years at a time when domestic production has risen by 50%.

With a strong £ making imports attractive and the fall in cast ewe values – not to mention extra charges applied on the slaughter of adult sheep – it is hardly surprising many have seen a poor return from sheep enterprise. And without export opportunities and a level playing field prospects for the sector dont appear to be much better.

Although poor prices across Europe should give a higher SAP, any increase will be diluted by the strength of sterling and must be accounted for when assessing likely income.

Typically, SAP is expected to be about £16 a ewe before agri-monetary aid for 1999.

If you know your income (and likely costs) the question of what quota can be acquired should be straight-forward to calculate.

Bridging the gap

As a broker, one of the most difficult tasks is to bridge the gap between what producers are willing to pay and what sellers are willing to let it go for. I know it is our job to negotiate but at the same time the producer who keeps extra sheep has all the risk for potentially little more than half the premium, the balance being taken by the quota-holder.

All those looking to acquire quota will be wondering if they got the best deal. Its likely that a neighbour or friend will let slip that they received a better one, but such deals often remain illusive.

The main thing is to do your budget and decide what is the best return for yourself and calculate your break even point for leasing or buying.

Remember, the only person looking after your business is you.

Time is still on the producers side; quota transfers must be submitted by Feb 4 next year. &#42

TRADE

DEVELOPMENTS which bring buyers and vendors together have to be welcomed, especially when breeding sheep sales are a tough trade and many stock remain unsold.

That is why a new sale by the National Sheep Associations eastern region is being held at Thame, Oxon, next month. It aims to unite buyers and sellers in the former Banbury Stockyard catchment area.

But it offers more than a straightforward auction. For the first time it will use the internet to promote stock before the sale and, more importantly, try to secure buyers for those animals which fail to achieve their reserve price in the ring.

It will be a multi-breed auction as more farmers are looking to secure quality breeding stock rather than being solely influenced by the colour of the sheeps head. While there continues to be no market for the "pile them high and sell them cheap" breeders, the industry must do more to help promote those better rams – many with performance data – to find buyers.

Prospective bidders will be able to view the catalogue on a special web site developed by Fenweb, the Cambridgeshire-based MAFF and EU funded project launched by agriculture minister Nick Brown.

Once the sale is complete, vendors will have the opportunity for any unsold stock to be posted on the site, with a suggested asking price and an independent valuation based on recent trade. A full round-up of the days sale will also be posted on the web page.

It is hoped that this new technology, which many believe is too important to ignore, will keep the gate open for potential buyers even when stock fails to make a reserve. This could overcome the picky trade, which in my own experience saw three out of four rams sell at a recent auction at prices that varied by more than £100.

The NSA internet service will be developed prudently, and will be buyer driven. Free internet access (such as that provided by farmersweekly.net, see p4) will give more farmers increased opportunities to view stock on offer, and it is buyers who will help develop the web site. We welcome suggestions that could help encourage the sale of stock – please contact me direct and talk through any ideas.

There will be a charge for those using the service, other than NSA eastern region members, who will receive it free. Initially, the cost will probably be a one-off fee of £10 for administration and £1 for every sheep entered. A breeder selling four rams would therefore pay a total of £14.

All the stock will be MV accredited, have a full NSA inspection – looking especially for caseous lymphadenitis – and will include any performance data or records.

It is hoped buyers will liaise with auctioneers and breeders if looking to buy rams from the site. While it is never advisable to buy a ram unseen, the web is a least a contact point.

The success of the service will depend on the integrity of producers. It is open to abuse, and I hope those who use it will not be tempted to complete private deals but honour the auctioneers input and commission charges.

Details are now available on a temporary web site at www.fenweb.net/nsa/org. These will remain permanently on the NSA website at www.nsa.org.uk until the next official sale at Builth and for eastern region members, the next sale at Melton.

&#8226 John Maxwell is NSA eastern region ram sale chairman, and can be contacted on 01638 720291. &#42

TRADE

A CHRONIC shortage of prime cattle which could last right through to June 2000 will test the nationalistic purchasing, processing and retail policies established by the domestic multiples since the shut down of the export market and the eruption of farmer led anti-import demonstrations three years ago.

Slaughterings, which have been unusually light since the second week in March, are already slipping further and despite determined efforts by abattoirs to disguise this, both deadweight and auction prices are at last beginning to creep up.

Earlier this week some English finishers with supermarket quality bullocks were being paid 183p/kg deadweight. Although wide variations in dressing specification and killing out percentage make it difficult to compare like with like, animals of similar quality at auction appeared to be levelling out at a 188p deadweight equivalent.

Many feeders and finishers expect prices to continue to inch upwards as prime cattle numbers continue to shrink.

However, this optimism is not mirrored in the slaughter sector where anxious abattoir owners have been given a supply price by their supermarket customers and told, more firmly than at any time before, that it will not budge an inch even if cattle prices hit the stratosphere.

The view in the trade is that the multiples are not only aware that the trashing last year of 71,000 home bred beef cross and 580,000 dairy calves through the CPAS means that home-killed prime cattle supplies will be thinner than at any time in the recent past.

But there is also anticipation by finishers that the new £17 a head slaughter premium and the lift in BSPS claims made in 2000 will slim down the number of feeding cattle on offer through the October-March supply period too.

As a result retailers are determined not to get caught up in a domestic beef supply crisis. Their way out is to allow their suppliers to be squeezed between the rock of a rising slaughter cattle market and the hard place of a determined top down pricing policy.

And their trump card is the threat, either real or implied, that if their big dedicated suppliers in Britain cannot deliver the goods in either volume or price terms they will simply order more beef from the Republic of Ireland, where it is the equivalent of around 152p/kg deadweight (new EU dressing spec) or 70p/kg at auction.

Either way British slaughterers face desperate times. Weekly clean throughput is down 20-22 per cent compared with period before the CPAS was adopted and this years imports are expected to top 210,000 tonnes – or over 23 per cent of the beef eaten in Britain.

And the price pressure cork will soon be tightened by the release of UK beef onto the export market through the Date-based Exports Scheme later this summer which will include surprisingly large quantities from Northern Ireland to the Albert Heijn supermarket chain in the Netherlands.

However, abattoirs are saying that if the multiples are true to their word and refuse to pay more for their beef, there is little point in paying more for cattle and turning in a loss. Some, especially those with Irish owners, may even decide to ease back temporarily on domestic slaughtering and process and pack significant volumes of imported Irish beef instead. &#42